“The market continued its shift from a pure price-play mechanism towards a market driven by commitment to delivery, quality and right pricing strategies. High price points, inventory pressures and cautious buyers resulted in muted demand in metro cities,” said Anshuman Magazine, regional head chairman of CBRE, the multinational realty company.

Demonetisation, Rera (expected to kick in 2017) and the coming national goods and services tax is expected to put pressure on the liquidity conditions of developers

Demonetisation, announced in early November, was bad news for developers, battling a prolonged slowing over three years.

A fourth of the market is believed to be cash-based and cash deals are prevalent in the National Capital Region (NCR) and secondary markets in Mumbai. Many said the reports about price fall and demonetisation itself made property buyers hold their plans.

“Given that old currency notes are no longer valid, home buyers/ investors using unaccounted wealth to carry out transactions in cash are facing a tough time. And, developers accepting cash components are facing a higher liquidity crunch than those accepting all payments through cheque/bank transfer,” said Anuj Puri, chairman at JLL India.

Demonetisation, Rera (expected to kick in 2017) and the coming national goods and services tax is expected to put pressure on the liquidity conditions of developers.

Says Ajay Jain, executive director at Centrum Investment Banking: "It (demonetisation and Rera) would lead to financial default by even many reputed developers. As a result, NPAs (non-performing assets) of banks and non-banking finance companies would further increase."

However, Sunil Rohokale, managing director at ASK, the financial services group, said the end-user market was intact and could see a spurt in response to falling rates, Rera and other initiatives of the government.

Capital values (CVs) across cities, especially in Hyderabad, Pune and Bengaluru, saw gentle appreciation in 2016 and this is expected to continue in 2017 as the housing markets mature and become more end user-driven than before, said JLL’s Puri.

“Sales momentum continued to remain steady. It is likely to pick up from the second half of 2017, after the dust has settled on demonetisation, which has made many buyers hold their purchase decisions in anticipation of some easing in residential prices,” he explained.

Even as the inventory overhang reduces, the three biggest markets in terms of volumes of unsold units (including under-construction) are the NCR, Mumbai and Bengaluru.

By volume, the NCR stands at 37 per cent, more than a third of India’s unsold (including under-construction) house inventory, said Puri. Less than five per cent of the units among the total unsold inventory across the three metros are ready for possession.

Bengaluru, a largely end user-driven market, has the least unsold inventory in project launches. It is selling almost all units by completion of construction, he said.

2017 is also likely to see the highest mall space becoming operational, second to 2011.

Developers are also hopeful that things will pick up. “We should witness higher volume of deliveries in the residential space by most developers, though transaction volumes will remain low and we expect limited launches to take place. End-users might start looking at the markets again,” said Rajeev Talwar, chief executive of DLF.

Said Vikas Oberoi, chairman and managing director of Oberoi Realty: "By the first quarter of 2017, we should see recovery on the back of improving affordability, due to the declining interest rates and huge reduction in supply due to Rera."

Office property

The mega stake sale by DLF’s promoters is expected to close in FY18. Hiranandani's $1 billion stake sale in commercial assets was the biggest deal in the segment this year. The market is also closely watching the stake sale by K Raheja Corp and the Embassy group, among others, in 2017.

ASK’s Rohokale says Real Estate Investment Trusts or REITs will be game changers in 2017. He expects at least three entities to file for REITs next year.

Absorption of office spaces also remained strong in 2016 and should maintain the pace in 2017.

According to JLL's Puri, overall demand for commercial real estate in 2016 is expected to amount to 34.2 million sq ft once the final readings for the fourth quarter of 2016 are in, on the back of healthy absorption and pre-commitments. Of this, the net pan-India absorption up to the third quarter was 26.4 mn sq ft.

"Although availability of right space at the right location remains a challenge for many occupiers, 38-40 mn sq ft of new space will be added in 2017. Thanks to more investment in infrastructure, tier-II cities such as Pune, Hyderabad and Chennai are expected to drive office demand in 2017," he said.

Malls

The year 2016 saw some high-profile deals in mall space. While US based Blackstone is aggressively buying malls with its Nexus Malls, other such as GIC and CPPIB were raising the the game in retail properties.

Blackstone is also in talks with other mall owners, though it put off a plan to buy a mall in Coimbatore.

In November, Dutch pension fund asset manager APG and the Xañder group’s VR formed a joint venture to acquire a portfolio of three shopping malls from a Xander fund, for about Rs 2,000 crore ($300 million).

Canada-based CPPIB is also set to take a stake in Phoenix Mills’ Bengaluru mall project, making an entry into Indian retail property.

This year is also expected to see private equity (PE) investments of about Rs 4,200 crore in retail assets, the highest level since 2008, goes a report by consultants Cushman & Wakefield.

Driven by increased demand from retailers, the top eight Indian cities witnessed 10 malls becoming operational. This amounted to 5.31 million sq ft of mall space till September, the highest number of malls becoming operational since 2012.

2017 is set to witness more such deals. Oberoi Realty is planning to set up a mall platform with PE investors, Prestige Estates to sell stake in its rental arm and so on.

2017 is also likely to see the highest mall space becoming operational, second to 2011. High levels of activity are expected from 2017 on, after a prolonged slowing from 2014 that lasted through 2016. This was the result of very few malls getting completed in these three years and also due to poorly-performing malls shutting down.